Anne Redston

Lord Howe’s recent Making Taxes Simpler report has been widely welcomed, and rightly so. It criticises the exponential growth of the tax code, fiscal complexity and the government’s repeated failures to consult appropriately on tax changes.

The report recommends the setting up of an Office of Tax Simplification and a parliamentary select committee on taxation. The former would suggest reforms to the fiscal system, the latter will take evidence from experts.

Clearly, these will be bodies with some influence.
But one essential component is missing. The bodies have no power. This is clear both by implication – the report uses verbs like scrutinise, recommend, examine and listen; and it is also explicit – the bodies ‘have no power to initiate tax changes…there would be no threat to the Commons privileges in the fiscal field’.

The Tories need to be braver than this. One of prime minister Gordon Brown’s better decisions was granting independence to the Bank of England. We need something similar on the tax front.

The report declares that the changes will ‘revolutionise the framework within which we make tax law’. Sadly, they won’t. There can be no revolution without a transfer of power.

The right to veto administratively burdensome legislation would be a start. This could be the fiscal equivalent of judicial review – new tax laws would be judged by independent standards of fairness, proportionality and legitimate expectations.

And if (as is likely) a veto is seen as a step too far, the OTC could have the power to declare tax law incompatible with these standards, following the model of the Human Rights Act. The knowledge that sub-standard laws could be struck out or declared incompatible would itself act as a discipline on ministers and Treasury officials.

Lord Howe’s report correctly says that tax reform is urgently needed. But real change requires a transfer of (at least some) power to people who understand fiscal mechanics, just as power over interest rates was given to economists and financiers at the Bank of England.

I hope the mechanism for this transfer of power, as well as its scope and limits, will form the subject of his next report.

Anne Redston is visiting professor in revenue law at King’s College London. She writes in a personal capacity

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